Zero Growth in the US… are you prepared?

[economistParticipant 225]

Hello there everybody. There’s a topic that i’ve been putting a lot of thought into lately and I’ve been wondering what y’all were thinking. I’m sure many of you have noticed that due to the Quantitative Easing program (AKA QE) that the Fed instated a couple years back, interest rates in the U.S. have been less than stellar. I’m currently getting .05% on my savings account. No that is not a typo. This is due to the fact that QE is basically a money printing scheme, devaluing the US dollar and thus keeping growth rates extremely flat. Supposedly this has been preventing a double dip recession, but the program is supposed to end around September.

That leaves us in a position to look forward. What do you see happening as QE ends? I believe the stock market will contract significantly (The growth we’ve seen since ~2008 has all been propped up anyway) and we will enter deflation, thus causing prices to drop. People who are over extended or in untenable positions debt wise will see interest rates go up, and they will be discouraged from further borrowing. In general, prices will go down. I feel like that period of economic malaise will actually be a perfect time for real estate investment as prices should be low and the market will be flooded with foreclosures.

Does anyone else share my sentiments? Or am I completely off base here? Admittedly I’m pretty young, so I’ve never lived through this kind of event before. Any older guys have any knowledge to share? Thanks.

[Bad AssParticipant 0]

Don’t think anyone is sure if the next stage of the cycle is inflation or deflation. There are as may economists who think all that QE money must end up somewhere creating inflation. Your scenario is equally plausible but let us hope you are wrong. If there is another bout of deflation we will all be screwed as governments have no more monetary stimulus. A solution may be to print money and give it away via a tax cut but such a policy has never been implemented before.

[UntamedParticipant]

Hi Econo. It’s always a buyer’s market during “crises” and I think the best to cover your wealth is Real Estate. Buy as much LAND as you can and if it has water on it buy it TWICE.

Don't let them Blame, Shame or Tame you!
Give 'em NOTHING, not even an answer!
#GenderSegragationNow!

[BiG_WeaselParticipant 116]

I think we’re heading to where Greece is now.  The numbers simply don’t add up.  The kicker is, though, that since 70% of the US economy is consumer spending, the only way (and I mean only, because we’re a bunch of lazy, ignorant effs) to get people out into the street to protest and get real change (or maybe even another Civil War) is to hit them in the wallet.  Austerity will really eff up this country.  When fat AWALT has her benefits cut, and she can’t afford to buy her cigs and stuff, people will take up arms.  Otherwise, they’ll just keep on keeping on.

[BeerParticipant 11832]

Higher interest rates don’t scare me at all…I don’t see what the big deal is if mortgages go from 3.75% to 4% when a generation ago rates were in the double digits.  We will still be hovering down near all time low rates.  I actually think higher rates are good to an extent…make it less appealing for stupid people to get buried in debt and go claim bankruptcy, and make it more rewarding for savers and retirees when you can actually get a return that beats inflation in something safe, like a CD.

QE though…it scares the crap out of me.  I’m not an economist but when you basically add trillions of dollars of monopoly money into circulation…well welcome to the current stock bubble we are in.  I don’t know what the plan is to deal with the aftermath of QE…but it seems like if they leave all the monopoly money in the game we are going to be coming into a high inflation period as they have managed to cook the books over the last 8 years to keep the inflation numbers looking low even though they don’t feel it.  I think if this happens, it would be in your best interest to borrow as much money from banks as humanly possible in the next few months, as it’ll be cheaper to pay it back after a few years of high inflation.  If they try to siphon some of the monopoly money out of the game we are going to have a period of super low inflation or possible deflation, and a massive asset bubble popping, so expect stocks and real estate to tumble, so sit on cash right now and wait for the sale.

That’s why QE scares me…I see two very different outcomes in the near future, and how I’d want to play either are complete opposites.  It will probably be up to the next administration to up the mess left behind by the current.  For now I’m just sitting on cash.  If they start raising rates soon we’ll probably get a knee jerk reaction in the stock market, so we’ll have a nice chance to bargain hunt until people realize a .25% increase in rates really is more symbolic than anything.  If we get a decent drop when that happens I’ll be putting some money into some large companies that pay dividends to hold long term.  Meanwhile, I’m also keeping an eye on oil prices.  The world’s oil dependence isn’t going away anytime soon…sooner or later oil prices are going to rise again so putting some money into big oil and midstream companies if the energy sector gets battered much more might be a good long term investment.

[RoyDalParticipant]

This has been coming for a long time. Real estate should get you through, along with cash on hand — not in a bank. OTH, they could outlaw both, but then things will degenerate into a blood and guts scenario if they make renting real estate and holding cash illegal.

Society asks MGTOWs: Why are you not making more tax-slaves?

[NinjaParticipant 39]

Beer wrote:

Higher interest rates don’t scare me at all…I don’t see what the big deal is if mortgages go from 3.75% to 4% when a generation ago rates were in the double digits.  We will still be hovering down near all time low rates.  I actually think higher rates are good to an extent…make it less appealing for stupid people to get buried in debt and go claim bankruptcy, and make it more rewarding for savers and retirees when you can actually get a return that beats inflation in something safe, like a CD.

Normally higher interest rates are a good thing except today the global economy is in such an abysmal state that if Fed decides to raise interest rates it would cause a chain reaction of failures across the entire globe. This means that a higher interest rate would increase the amount of money the government would have to pay on the interest on the national debt. Not to mention most financial vehicles such as derivatives are based off the interest rates, we are talking trillions of dollars that are ready to implode.

[economistParticipant 225]

Ninja, would the “explosion” if assets that you speak of be harmful to everyone? Or only to the people who have a large exposure to those assets? Essentially: would I, with a large chunk of liquidity, and no exposure to the market, stand to profit from that? Wouldn’t that be a good time to buy or am I oversimplifying?

[BeerParticipant 11832]

If stocks take a big drop while you are sitting on cash, it is a great opportunity for you to buy low.  However, if we get hit with a few years of high inflation while you are sitting on cash getting a .05% return in a savings account you will end up essentially losing money.

It just sucks now because a crash is becoming more and more imminent so its pointless to buy when we are still at the peak of a bubble…hopefully we get the crash before the inflation so we can get our money into something that will have returns that at least keep pace with inflation.

[NinjaParticipant 39]

Globally it would affect everyone on the planet, on an individual level you would probably get wiped out completely, if you have large exposure to the market. In terms of actions to take, Beer is correct.

However we live in very uncertain times and many actions to take in the market that may seem intuitive would be pointless on the offhand chance that the currency turns into toilet paper.

[Anonymous 29]

economist wrote:

QE is basically a money printing scheme, devaluing the US dollar and thus keeping growth rates extremely flat. Supposedly this has been preventing a double dip recession, but the program is supposed to end around September. That leaves us in a position to look forward. What do you see happening as QE ends? I believe the stock market will contract significantly

I am an Australian and I keep a sharp eye on what is happening in USA  and China markets. I am not a believer so I do not pray but I do hope that another round of  QE is applied even though it is detrimental to billions of people worldwide as well as in the state’s in the long run. The long run, maximum 5 yrs. USA government has no choice but to go into QE 4 vithin a few weeks followed by QE 5 sometime late next year and that is when the pain will start.

 

Bad Ass wrote:

Don’t think anyone is sure if the next stage of the cycle is inflation or deflation. There are as may economists who think all that QE money must end up somewhere creating inflation. 

 

QE was never meant to be applied more than once origionaly, so subsequent applications  have flooded overseas markets and industries. However, the confidence in the US $ is like the story of the king with no clothes. Confidence in the dollar is fast going up into thin air. Reasons being that China, Russia, India and a few other countries have started unloading the dollar elsewhere by investing mostly into overseas ventures.

I will not explain it all in fine detail but will give you what to look into: . . . Russia / China joint venture,  gas and oil from north Russia  through Afganistan / China into south Asia. China in Africa: power systems roads and mining. China in South America: mining, rail, road transport.

By dumping the dollar as an investment tool (Russia / China) they are getting rid  a  toxic asset($)  and acquire  real value in business ventures overseas  which they ultimately control them  selves.    The dollar which was invested into the said countries is now used by those same countries to pay back debts/loans back to USA and IMF.  Conclusion: a flood of cheap,  billions of dollars will be back in USA devaluing what little value it has left and  inflation begins.

 

I tried to write this  as simply as I could, but if you need more  information please ask because there is so much more detail to it.

 

 

[UmbreonParticipant 152]

Honestly, I’ve been expecting this. We have been having large dips in the bull run every three years or so for around a decade now. These “recessions” have been stopped by government invention alone due to them keeping prices high and interest rates low. This creates a borrowing society where people buy with borrowed money which can’t be sustained.

Around 2018 we’re going to be in a slump again and I think if the rest of the world doesn’t change by then (haha) it will be bigger than the other two “recessions”. We’re over-priced. What goes up must come down.

I expect panic and mass price drops. It’ll be a great time to buy while everyone is panic-selling. Prices will raise again because population growth is explosive right now so resources are going to get scarce which will drive prices/inflation up on it’s own. We’ll have a few more dips before things start to tumble but I expect things to go to hell within the next century, probably within 50 years as we’re always increasing the pace of things. Start planning, guys.

Beauty fades, dumb is forever.

[MochaParticipant 90]

Bread and Circuses.

[The ShrikeParticipant 147]

Move your IRA and 401K into a money market offering within the options for your particular plan.  This will at least let you hold without wiping out 1/2 your wealth as occurred in ’07.  After things crater you can move it back, once things get back to normal your retirement should be in much better shape than it was.

Interest rates shouldn’t necessarily affect your mortgage payments if you have locked in a fixed rate, if you haven’t done a refi with a fixed rate in this market you really should.

Move to Texas!

[TaoTheMgtowWandererParticipant 263]

The Shrike wrote:

Move your IRA and 401K into a money market offering within the options for your particular plan. This will at least let you hold without wiping out 1/2 your wealth as occurred in ’07. After things crater you can move it back, once things get back to normal your retirement should be in much better shape than it was.

Interest rates shouldn’t necessarily affect your mortgage payments if you have locked in a fixed rate, if you haven’t done a refi with a fixed rate in this market you really should.

Move to Texas!

Actually, i would avoid the states like the plague…this vid explains why:

i hear Scotland is lovely this time of year, as well as Greenland…

My peace of mind is worth more then your vagina...cunt.

[CatsPawParticipant 423]

USA is in Stagflation mode, people just dont know it yet.
@black Magic, curentlly we have both inflation and deflation (deflation from the crisis and inflation from the currency printing).
When people say “Economists dont know” I always think “They do know, but they want to be the ones to benefit from it”.
In 2000 I pulled my cash from the internet stock market (well actually my mother did since I was not 18 yet) because I knew that there is no way that so much money goes into something that fast and then it just stays there.
If a 14 year old can see that, an economist can as well.

Will there be another QE program? You can count on it. We just dont know if it will matter once the s~~~ hits the fan.
If the fed goes all in weimeir republic style money printing, it will create a hyper inflation, but if people stop using the dollar before that, then it wont matter anyway.

My favorite part is when everyone keeps asking “ok but when will it happen”. Its like standing still on railway because the train is not coming yet.
Here is the problem: Everyone believes so much that what has value now days is the dollar that they will risk loosing everything to earn something more in terms of dollars than to play it safe and go to where the real value is all along.
Thats called greed, and its the most important variable when you want to CON someone.

Personally, based on my own calculations, I think it will happen in a period going from june 2016 to november 2016. Thats when I expect a total crash or more QE.

Why those dates? Because of how markets are reacting more violently to each new monetary change in the world. It seems to be increasing the volatility of the markets, and once it reaches 20% on a one week basis, I think people are going to start taking liquidity out of it (thats assuming they even can).
WE had virtually no response when the swiss unpegged the frank with the EURO (thats a big deal, it should have sent shockwaves the size of tsunamies), and right now markets are reacting very fast and to everything that is happening.

Also banks seem to be aware of this as they actually have already implemented bail-in protocols (that is, take money from your depositors to cover your losses), and passed them as laws in USA and Europe. So it seems everyone is getting ready for this crash… everyone who knows about it that is, since the media will talk about happy ponies until its too late.

[economistParticipant 225]

Hmm… It would appear that things didn’t happen quite as dramatically as everyone wanted to believe. Do you guys think that the instability we saw in the market last week was really the sign of the beginning of something big? I’m starting to think there was a little bit of alarmism going around there… perhaps the fed simply plans to keep interest rates low for an even longer period of time… and maybe a market crash isn’t as eminent as everyone would have us think.

[MrBurnsParticipant 83]

I’m also not an economist but I’ve been watching the situation with disgust for years now. I’m Canadian, my vote doesn’t affect the USA, but their actions sure as hell affect me.

[TaoTheMgtowWandererParticipant 263]

Here is an update to my last post: https://www.youtube.com/watch?v=9Pn0U8zTlMI

My peace of mind is worth more then your vagina...cunt.

[economistParticipant 225]

I’ve been doing a lot of reading lately, and honestly I’m starting to believe that we are not headed for some giant crash, but rather a slow stagnation. Our economic and tax policies are absolutely hare-brained as of late. Obama seems to be unable to understand that the only way we’ve maintained the dollar as the world’s reserve currency is by projecting force around the world. I’m starting to think that now that the Democrats have imported ~20 million illegal immigrants into the country, they have an unstoppable majority that will vote for whatever fairytale legislation they propose. Free housing and college for all! Free free free! And of course, those of us in the slightly higher tax brackets (35,000+) who actually have to pay income tax will be raped to pay for all of it. The entire surplus of our country is going to slowly be drained, and along with losing worldwide influence we will slowly shrink. BRICS will become the strongest economic force in the world and America will be marginalized. That’s probably great news for some, but it kind of sucks for me.

[Author]

Posts